Legal Definitions - dischargeability proceeding

A dischargeability proceeding is a specific legal hearing that occurs within a bankruptcy case. Its primary purpose is for a bankruptcy court to determine whether a particular debt can be legally eliminated (or "discharged") through the bankruptcy process, or if it falls into a category of debts that the law states cannot be discharged.

Essentially, it's a formal request to the court to decide if a specific financial obligation is eligible to be wiped out by the bankruptcy, or if it must still be repaid despite the bankruptcy filing.

Here are some examples:

• Imagine a small business owner files for bankruptcy. One of their creditors, a supplier, claims that the business owner intentionally provided false financial statements to obtain credit for a large order. The supplier would initiate a dischargeability proceeding, asking the bankruptcy court to rule that this specific debt, arising from alleged fraud, should not be discharged and must still be repaid by the business owner.

• Consider a situation where an individual files for Chapter 7 bankruptcy after being found liable for significant damages in a civil lawsuit. The lawsuit stemmed from an incident where the individual intentionally damaged another person's property. The victim of the property damage would likely file a dischargeability proceeding, arguing that debts resulting from "willful and malicious injury" are not dischargeable under bankruptcy law, and therefore, the judgment against the debtor should survive the bankruptcy.

• A person struggling with overwhelming student loan debt files for bankruptcy. While student loans are generally not dischargeable, there is a very narrow exception for "undue hardship." This individual might initiate a dischargeability proceeding, presenting evidence to the court that repaying their student loans would impose an undue hardship on them and their dependents, thereby asking the court to make an exception and discharge those specific debts.